contract law essay

Existing duty rule in Australian law

Australian law, derived from the commonwealth law with addition of its own has been in place ever since the settlement of Captain Arthur Phillip with the First Fleet in 1788 [1] . In result of the intelligence of Captain Arthur Phillip of understanding the doctrine of “terra nullius", and chose to “settle" rather than “conquer", Australia was automatically bound to the laws brought by settlers [2] . Through the years, Australia, which already had their independence, still implied the laws from the settlers but with terms and conditions of their own. One of the major section in business law of Australia was the section of consideration. Consideration itself in the English language is of a different meaning, but in law, consideration is defined as “an act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable" [3] . Consideration is very important in the eye of the law due to the fact that without it, the promisee might suffer a detriment whereas the promisor benefits or vice versa. Consideration can also help judges of the courts distinguish the validity of a contract regardless if it’s verbal or written, to be binding or not. One of the branches of consideration is the Existing Duty Rule. In this essay, description of the Existing Duty Rule, Origins and implementation, and the sources of influence on development of the Rule will be discussed.

Firstly, the Existing Duty Rule is a branch of the consideration in law which states that if the offeree offers a promise that is of no variation from the original binding promise, it is not considered a new promise and will not be binding [4] . The rule also states that it is of no good consideration if one is already under a duty to do, he or she must comply even if new money was offered [5] . This rule made its first debut in the case of Stilk v Myrick [6] , where additional money was promised to be given to complete a job obliged to be done in the original contract. The court held that due to the original binding contract, additional money was of no need to be given even when a promise was made. None the less, the rule has its strengths and weaknesses from the start. Its weaknesses were clearly made, where a promise to pay more is not legally binding and therefore not enforceable. This made the promisor to not be legally bound by his or her promise. The weakness made the promisee to have no legal rights to sue. This rule was formed in the first place was to aid in distinguishing whether new promises are legally binding or not but it also has exemptions present depending on situation of cases. In the present, the existing duty rule has been described as a blunt instrument which invalidates 'non extortive as well as extortive re-negotiations' [7] . The court also found other ways to counter the existing duty rule where if under a certain situation a demand for a additional benefit is needed, it is already considered of a good consideration. The judges also argued that the original contract might not have needed to be modified but instead a new contract between the offeror and the offeree was made during the new promise [8] .

The Existing Duty Rule existed because of a precedent case, the Stilk v Myrick [9] case. As said before, additional money was promised to be given to the seamen by the captain of the ship,Myrick, in order to keep the seaman from deserting the ship. The captain promised that the seamen would receive extra wages through the division of wages of the two deserted sailors among the remaining crew. When all was done as promised, the captain reneged the promise but even when Stilk sued, the judge overruled the promise and held that the duty of the seamen were to work the ship back to port. Even though a promise was made, it was not considered a new promise because the crews were merely doing what they had to in the first place. The Existing Duty Rule explained that no clear additional benefit was implied therefore the promise was of no legal binding power. Several cases like Watkins & son v Carrig [10] , Wigan v Edwards [11] and Collins v Godefroy [12] , where the judge also held that the Existing Duty Rule was present, ended with decisions where the plaintiff was to no avail solely because of the judge understanding the difference of whether a new promise was of valid legality.

The traditional approach of this rule was simple; new promises must be of dissimilarity from the old promise, and if not, the new promise is invalid in the eyes of law. But approximately a century later, the empowering existing duty rule had its exemptions. Judges in the court realized that under the right circumstances, a new promise would actually give new consideration. The exemptions were used on the 1991 case of William v Roffey Bros & Nicholls [13] . This case, after being studied by the case had a valid new promise which was to pay more to the plaintiff. In Stilk v Myrick [14] additional money was also to be given to the crew in completion of what the crew was obliged to do, but in the William v Roffey Bros & Nicholls 1991 [15] case, the promise of extra money was valid because the plaintiff was giving new consideration of finishing up the job on time even though the plaintiff had financial difficulties. The completion of the building within the time frame and saving the time to find a new carpenter, were a supplementary benefit gained when the defendant. The court held that the defendant obtained added benefit which was only acquired from the promise that extra money was to be given to the plaintiff. This exemption off the existing duty rule was that if a practical benefit was present between the offeror and the offeree, then the exemption would come in play even though it seems like it was just the completion of what the offeree promised at the beginning. This exemption which was never seen in precedent cases is vital in making the decision in this case because it implied for the first time the term ‘practical benefit. In the case of William v Roffey Bros & Nicholls [16] , the term ‘practical benefit’ [17] was the term that the judge of the court at that time implied to the decision of the case. The performance of the carpenter was a benefit gained by Roffey in the case while Williams were to gain the additional money that was promised. Another case that exempted the existing duty rule was in the case of Musumici v Winadell Pty Ltd [18] . The parties of this case related themselves to the Williams v Roffey Bros & Nicholls [19] case to show similarity and therefore exemption of the existing duty rule. The case was about the lease of a fruit shop in a shopping complex. The Winadell`s leased a shop to Musumici but then leased another part of the shopping complex to a fruit retailer store. Due to the though competition, as the Musumici`s were also selling fruit, they pleaded and Winadell agreed that he would lower the rent by one third. When the Winadell reneged, the court held that the promise was binding due to the same reason as the Williams case, practical benefit. None the less, the appearance on this exemption was not unanimously agreed by others [20] . This disagreement towards the exemptions was seen from the case of Re Selectmove Ltd [21] where the judgments were based on the strongly established existing duty rule. It is also to be seen that if the Musumici case could be relying on the exeption, the case of Stilk v Myrick [22] could be argued that it is not ignoring the occurrence of disbenefit [23] . The judges weren’t only favoring the benefits gained but even if the new promise were to bring detriments to both parties, the promise is still acknowledged by the court as good consideration [24] . On the other hand, practical benefit in situations of early re-payment was of no good consideration according to the Foakes v Beer [25] . Even though the existing duty rule had its exemptions, the exemptions were a cause of confusion and contradiction to the fundamentals of law of contracts [26] . This is because that the exemptions, like practical benefit can be seen in many different perspectives. As the law must consider many possibilities, the existing duty rule was studied and given ways of how it can be exempted. Third parties, like agents are held responsible for new promises made even if the offeror was not present. This is because the agent was acquainted as a representative of the offeror him or herself and therefore any promise made by the agent would be legally binding.

Finally, the existing duty rule is a rule created by the court to adjourn the difference of binding promises and that fresh consideration can be binding under the right circumstances, as seen in the case like William v Roffey Bros & Nicholls [27] . The rule is important in obtaining one`s legal rights in a lawsuit as seen in precedent cases. Without the rule, one’s rights cannot be legally supported and promises would always be of no binding power. With the existence of this rule, promises can no longer be easily given and not upheld by the promisors. However, the introduction of this rule with its exemptions as considerations has harmed both the doctrine of consideration and the more fundamental underlying basis of contract law itself [28] . Like in cases of William v Roffey Bros & Nicholls [29] the courts decision was seen to weaken the principle once held in the precedent case of Stilk v Myrick [30] . Never the less, this existing duty rule has made the contract law a more stable and reliable law. The existing duty rule made its presence and redefined rather than abolish consideration within the context of contractual variation [31] .

In conclusion, the existing duty rule which was derived from the contract law section of consideration plays a major role in making the law a more detailed version. The traditional approach of existing duty rule had made it clear that obligations were of no new consideration but the modern approach varies. If a mutual benefit was to be gained or a practical detriment was to be suffered, the new promise were to be a good consideration and will be help as a legal binding promise. The existing duty rule, in the current time, is fine tuned by precedent cases and gives a better understanding of the law. The creation of this rule has reduced absurd and unjust verdicts in courts whenever similar happenings occurred. Never the less, the rule of existing duty rule and the upholding of its content is always a better choice in courts unless a clear indicator of exemptions like in the case of Williams v Roffey Bros & Nicholls [32] should there be an application of the exemptions [33] .

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